1. Impacts of Mod 244 Steve Nunnington xoserve

2. Background  96.5% of transportation charges based on capacity.  These are dependent on historical throughput.  Capacity charges on DM sites are based on:-  Bottom Stop SOQ. (BSSOQ) applicable to certain Interruptible sites.  DM SOQ.  Interruptible sites still pay 50% of firm costs.  BSSOQ can only be amended in the AQ Amendment window.  BSSOQ is based on the consumption of the Uncapped Winter Peak. (Highest daily demand between Oct – May)  Challenges are currently only allowed to those meter readings and consequently their derived consumption.  Number of challenges are very low.

3. Background  DM SOQ can only be reduced by shipper from October to January each year.  DM SOQ cannot fall beneath the value of the prevailing bottom stop SOQ.  DM SOQs are all passed to Networks for approval be they increases or decreases.  DM mandatory level is AQ of 58,600,000 Kwh below which they become voluntary.  Interruptible threshold AQ of 5,860,000 Kwh below which sites cannot be interruptible.  DM threshold. Site cannot be DM below AQ of 73,200 Kwh. There are currently 158 of these.  AQ needs to be reduced in line with SOQ to ensure the supply point falls within the correct charging band.  Ratchet mechanisms currently apply only Oct – May.  All these processes are fully systematised and are robust.

4. Analysis  There are 2058 DM supply points on xoserve systems.  Under Mod 244 there would be the following eligible sites:-  DM Interruptible 1410  DM Firm Mandatory 185  TOTAL1595  There are also 115 Unique Sites which qualify under the terms of the Mod but these could be dealt with under current US off line processes.

5. Analysis Comparing Feb 2008 & Feb 2009 % Change in Consumption DM FIRM MandatoryDM InteruptibleTotal Count% % % N/A 116%1138%1248% = -100% 84%1017%1097% -90% to -99% 42%171%211% -80% to -89% 53%50%101% -70% to -79% 32%111%141% -60% to -69% 63%211%272% -50% to -59% 84%373%453% -40% to -49% 95%413%503% -30% to -39% 126%675%795% -20% to -29% 179%916%1087% -10% to -19% 2715%15411%18111% 0% to -9% 3217%24517%27717% Increased Consumption 4323%50736%55034% Total Supply Points 185 1410 1595

6. Analysis  This would mean under the terms of Mod 244 for all DM Mandatories the number of candidate sites would be as follows  20% 587  30% 479  40% 400  50% 350  Additionally 51 US would fall in line with the 20% rate. Looking ahead  Should BSSOQ as a concept be scrapped or the definition be changed? (E.G AQ/365)  Should we allow DM SOQ appeals throughout the year?  Should ratchets be applied all year round for eligible sites?

7. Possible solutions  Rebates on Billing (Off-Line)  Bills issued as normal using SOQs  Rebate issued at M+2 to amended SOQ values  Monitoring of usage against various thresholds and consumption  Ratchet process required  Admin charge  Re-confirmation of the site under a new MPRN. (Off-Line)  Co-ordinated end date of MPRN and creation of new one  New values to be applied to new MPRN  Monitoring of usage against various thresholds and consumption  Ratchet process required  Admin charge  System solution (On-Line)  Investigating availability of a screen to amend BSSOQ.  Window for reducing DM SOQ may be parameterised.  Develop solution to monitor and carry out correct solutions when breaches apply.

8. Risks of an Off Line Solution  UK Link may not reflect true values  Labour Intensive.  Unique Sites process handles 115 sites.  Very labour intensive  Deals with around 20-25% of throughput  With 4.75 FTEs  Mod 244 currently has 587 candidates  Daily monitoring  Reads  SPA process (Does the Mod span transfers?)  Thresholds  Ratchets  Admin charge

9. Risks 2  Demand forecasting for Networks  Potential for manual errors in Billing  AQ could be out of sync with SOQ.  Process required to increase SOQ/AQ when site returns to normal production  Incorrect information regarding capacity availability.  Potential emergency impact if interruptible values are incorrect.  Development of off-line solution may be time consuming. Estimates range from 3 – 6 months from Ofgem approval.  Where shippers fail to comply there are complex activities such as ratchets that will need to be undertaken which will be both time consuming and labour intensive.  If analysis is incorrect and large volumes of supply points are submitted through this process the developed solution may not be appropriate.  DM CSEPS have not been considered along with impacts on IGTs.

10. Conclusions  Mod 244 should be driven by take up.  Small numbers will mean off line system  Larger numbers mean that a systematised solution is essential.